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Experts Warn Inflation in China Could Lead to Social Unrest


With China's consumer inflation rate rising to an 11-year high in January, analysts are warning that further increases in food prices could cause social unrest. They also say that if China decides to cut back on its food exports, inflation and unrest could spill over into other parts of the Asia Pacific region. Naomi Martig reports from VOA's Asia News Center in Hong Kong.

Most economists are predicting that China's inflation rate, which was 7.1 percent in January, will continue to increase in the near term.

The issue is especially sensitive for policymakers in Beijing, because a major component of the overall inflation rate is a jump of more than 18 percent in food prices over the past year. The cost of pork, a staple food for Chinese people, is up more than 58 percent compared to a year ago.

Severe weather in southern China during the Chinese New Year period, which crippled the country's transport system and destroyed crops in some regions, contributed to the rise in food prices.

Economists say China's inflation rate is not out of control. But they are concerned about the potential for social unrest should prices continue to increase.

Mark Thirlwell is the director of the International Economy Program at the Lowy Institute for International Policy in Sydney. He says food prices are a sensitive issue in developing countries because food is such a large part of expenditures by poorer people.

Thirlwell says in China, food is about a third of the consumption basket for the general population, and for those Chinese in the lower income bracket, about half.

"Analysts or observers from outside look back at previous cases when you've had very high food price inflation," he noted, " and I guess the classic case that people look back to is 1988, and we also see some in the mid 1990's. And then, there were social consequences, there were protests, there were disturbances."

Chinese inflation rates in 1988 were about 19 percent, and in 1994, 24 percent.

There are concerns that this kind of inflation could spill over into neighboring countries. Analysts say there is a danger that continued rises might prompt Chinese food exporters to raise their prices, which could lead to inflation in other countries in the region.

Mark Thirlwell says there is also a danger that China could cut back on its food exports, which could have a similar effect.

"You stop things going out, that obviously has the reverse effect on global markets. If you start to choke off supplies of food into the marketplace, then that puts up food pressure on prices for everyone else," he said.

Thirlwell says food inflation could also lead to social instability in other countries.

China has become a major factor in global food exports. In 2006, for example, the country accounted for around 12 percent of world trade in fruits and vegetables.

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